Voxeljet AG: Slowly But Steadily Ramping Up – voxeljet AG (NYSE:VJET)

Recently, Voxeljet (NYSE:VJET) came out with its Q4 2017 results along with guidance for fiscal 2018, which were both below expectations. There is no doubt that additive manufacturing (AM) is a high-cost, high-risk venture. And the market for AM is also at a nascent stage. With a small scale of operations as compared to biggies such as Faro Technologies (NASDAQ:FARO), Stratasys (NASDAQ:SSYS), Perceptron (NASDAQ:PRCP) and ExOne (NASDAQ:XONE), what are the odds of Voxeljet’s success in the long run?

A glance at the numbers

Voxeljet has two segments – gross profit margins for the Systems segment and the Services segment increased respectively by 10% and 7% on a YoY basis. The overall gross profit margin remained 40% for both fiscals. Operating loss reduced by 22% YoY.

Services revenues increased by 25% YoY. Systems revenue fell by almost 12%, mainly due to non-shipment of 2 printers for payment-related issues. While some may say this was a tactful way of pushing the sales onto next year for the EIB contract, it is only going to benefit the company anytime soon. The US and Europe operations continue to be profitable, and sales are now picking up in China too. Guidance for fiscal 2018 is also modest with almost no changes from fiscal 2017.

Positives to look at

Voxeljet has been constantly trying to automate mass manufacturing through the advancement of 3D printing technology. The VX1000 printing system for UK-based customers offers a host of opportunities in the medical, aerospace and automotive fields. The new large-scale production facility in China for low-cost production and assembling of printing systems is almost complete. This will help in enhancing profitability and provide for market penetration in Asia. The loan contract of €25 million with the European Investment Bank is great news for the company. It shows the level of confidence this company attracts from the Horizon 2020 program. The 3-year volume contract with TEI with the introduction of the High Speed Sintering process (HSS) is another great achievement that will help Voxeljet enter the thermoplastics market to directly manufacture end-use products.

The transition from regular manufacturing to additive manufacturing is bound to be a tedious one. It requires organizational changes on the customer side, particularly the supply setup. Through its Services segment, Voxeljet is supporting and integrating these potential long-term customers in providing unique innovations that suit their requirements.

The company is also getting customers in the hybrid and electric automotive market that are ready to invest in 3D printing technology for their production capacities. Demand, especially in the casting area, will gain traction due to reduced costs.

Conclusion

While AM may be a comparatively new sector, it definitely brings its share of risks along with high rewards. The sector is expected to grow by 24% per year. For companies such as Voxeljet, it is only the transition period that is going to hurt, be it due to high integration costs, intensive R&D or lack of mature customers. But the scenario is fast changing given the economic and other benefits such an amazing production technology offers. The company is doing really well in Germany. Coupled with that, China and India have a huge demand, and here VJET can develop a formidable presence going forward.

When it comes to companies such as Statasys and Faro Technologies, we see that scale of operations has not been a contributor of profitability except for Perceptron, Inc., which has a very high P/E. Voxeljet may be small in size, but everything should go well as long as it is focused and generously financed. I am definitely upbeat about this company.

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